Final answer:
The markup percentage on Bright Force Inc.'s product cost is 40%. For Doggies Paradise Inc., a perfectly competitive firm, the profit-maximizing quantity is determined where marginal revenue equals marginal cost, which is between three and four units.
Step-by-step explanation:
To determine the markup percentage on product cost for Bright Force Inc., we need to consider that the product cost is $50 per unit and the desired profit is $20 per unit. Using these figures, we can calculate the markup percentage as follows:
Markup Percentage = (Desired Profit/Product Cost) × 100 = ($20/$50) × 100 = 40%
Therefore, the markup percentage on product cost is 40%.
Now, let's consider the example of Doggies Paradise Inc. to explain how to calculate total revenue, marginal revenue, total cost, and marginal cost for a perfectly competitive firm. For each output level from one to five units, the total revenue is the quantity sold times the price of $72 per dog coat. The total cost is the sum of fixed and variable costs. Marginal revenue is the change in total revenue from selling one additional unit, which in a perfectly competitive market is equal to the price. Marginal cost is the change in total costs from producing one additional unit.
To illustrate, here is the table for Doggies Paradise Inc.'s costs and revenues:
- 1 unit: Total Revenue = $72, Total Cost = $164, Marginal Revenue = $72, Marginal Cost = $64
- 2 units: Total Revenue = $144, Total Cost = $184, Marginal Revenue = $72, Marginal Cost = $20
- 3 units: Total Revenue = $216, Total Cost = $214, Marginal Revenue = $72, Marginal Cost = $30
- 4 units: Total Revenue = $288, Total Cost = $284, Marginal Revenue = $72, Marginal Cost = $70
- 5 units: Total Revenue = $360, Total Cost = $370, Marginal Revenue = $72, Marginal Cost = $86
The profit maximizing quantity is where marginal revenue equals marginal cost, which based on this table, is between three and four units.